Net income fell to 3.798 billion kroner ($632 million) from
4.614 billion kroner a year earlier, the Oslo-based bank said in
a statement today. That beat the 3.47 billion-krone average
estimate of 11 analysts surveyed by Bloomberg. The bank booked a
one-time 569 million kroner restructuring cost in the period.

DNB raised mortgage rates in the period to build up capital
to cope with stricter standards and trimmed costs to deal with
the fallout from Europe’s debt crisis. The bank, the world’s
second-largest lender to shipping lines, has also been
struggling with rising loan losses at its maritime division amid
vessel overcapacity, slumping freight rates and low demand.

“We have received written marching orders from the
authorities to build far more capital through 2013 and to give
this our highest priority,” said Rune Bjerke, DNB’s chief
executive officer in the statement, adding that Tier 1 capital
has been raised by about 11 billion kroner over the past 12
months. “This capital build-up increases the financial strength
of the bank, though stricter capital requirements come at a cost
for both employees, shareholders and customers.”

Total loan impairments rose to 937 million kroner from 685
million, while interest income climbed 12.7 percent to 7.48
billion kroner, DNB said. Return on equity fell to 11.6 percent
from 15.9 percent.

The bank said impairments will remain within the guided
level and that “due to somewhat weaker market developments,
volumes are expected to show a less favorable trend than
forecast, especially in the corporate market.”

The bank forecast zero growth in underlying costs and said
that all other financial targets remain unchanged.